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SEC Orders Three Self-Reporting Advisory Firms to Reimburse Investors

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Washington, D.C.–(Newsfile Corp. – April 17, 2020) – The Securities and Exchange Commission today announced settled charges against two advisers that self-reported as part of the Division of Enforcement’s Share Class Selection Disclosure Initiative, and a third adviser that self-reported within months of the initiative’s self-reporting deadline.  The Commission’s orders today are the final cases the Division intends to recommend under the terms of the initiative.  Including today’s actions, the Commission has ordered more than $139 million to be returned to investors as part of the initiative.

The voluntary initiative announced by the Division of Enforcement on February 12, 2018, provided advisers an opportunity to self-report that they had failed to fully and fairly disclose their conflicts of interests in selecting for their advisory clients more expensive mutual fund share classes that paid 12b-1 fees when lower-cost share classes were available for the clients and be eligible for standard settlement terms that did not include the imposition of a civil penalty.  From March 11, 2019 through September 30, 2019, the Commission issued orders against 95 advisers that chose to participate in the initiative

“This incredibly successful initiative led to the return of almost $140 million to harmed investors, stopped wrongful conduct, and highlighted the importance of an adviser’s obligations to provide full and fair disclosures to clients,” said C. Dabney O’Riordan, Co-Chief of the Asset Management Unit.  “We continue to actively pursue disclosure failures that financially benefit the adviser to the detriment of the client.”

The SEC’s orders find that Merrill Lynch, Pierce, Fenner & Smith Incorporated and Eagle Strategies LLC violated Section 206(2) of the Investment Advisers Act of 1940, and ordered that they are censured, that they cease and desist from future violations, that they pay disgorgement and prejudgment interest totaling over $425,000 and that they comply with certain undertakings, including returning the money to investors.

The SEC also charged Cozad Asset Management Inc., which self-reported its share class selection violations to the Commission in the months following the initiative deadline.  The SEC found that Cozad failed to fully disclose the conflicts arising from its and its associated persons’ selection of more expensive mutual fund share classes for clients when lower-cost share classes for the same fund were available.  The SEC’s order finds that Cozad violated Sections 206(2) and 206(4) of the Advisers Act and Rule 206(4)-7 thereunder, and ordered that it is censured, that it cease-and-desist from future violations, that it pay disgorgement and prejudgment interest totaling over $400,000, as well as a $10,000 civil penalty, and that it comply with certain undertakings, including returning the money to investors.

Since September 2019, the Commission has issued orders against two firms that were eligible to self report pursuant to the initiative, but failed to do so.  See Mid Atlantic Financial Management Inc. (ordered to pay $1,027,002 in disgorgement and prejudgment interest and a $300,000 civil penalty) and BPU Investment Management Inc. (ordered to pay $692,107 in disgorgement and prejudgment interest and a $235,000 civil penalty). 

The Share Class Selection Disclosure Initiative was led by the Division of Enforcement’s Asset Management Unit. The initiative settlements announced today were coordinated by SEC attorneys Ronnie Lasky, Donna Norman, Corey Schuster, Janene Smith, and John Farinacci, an industry expert in the Asset Management Unit.

The SEC’s investigation of Cozad was conducted by SEC attorney David Benson of the Asset Management Unit.

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Central banks and the FinTech sector unite to change global payments space

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The BIS, along with seven leading central banks and a cohort of private financial firms, has embarked on an ambitious venture known as Project Agorá.

Named after the Greek word for “marketplace,” this initiative stands at the forefront of exploring the potential of tokenisation to significantly enhance the operational efficiency of the monetary system worldwide.

Central to this pioneering project are the Bank of France (on behalf of the Eurosystem), the Bank of Japan, the Bank of Korea, the Bank of Mexico, the Swiss National Bank, the Bank of England, and the Federal Reserve Bank of New York. These institutions have joined forces under the banner of Project Agorá, in partnership with an extensive assembly of private financial entities convened by the Institute of International Finance (IIF).

At the heart of Project Agorá is the pursuit of integrating tokenised commercial bank deposits with tokenised wholesale central bank money within a unified, public-private programmable financial platform. By harnessing the advanced capabilities of smart contracts and programmability, the project aspires to unlock new transactional possibilities that were previously infeasible or impractical, thereby fostering novel opportunities that could benefit businesses and consumers alike.

The collaborative effort seeks to address and surmount a variety of structural inefficiencies that currently plague cross-border payments. These challenges include disparate legal, regulatory, and technical standards; varying operating hours and time zones; and the heightened complexity associated with conducting financial integrity checks (such as anti-money laundering and customer verification procedures), which are often redundantly executed across multiple stages of a single transaction due to the involvement of several intermediaries.

As a beacon of experimental and exploratory projects, the BIS Innovation Hub is committed to delivering public goods to the global central banking community through initiatives like Project Agorá. In line with this mission, the BIS will soon issue a call for expressions of interest from private financial institutions eager to contribute to this ground-breaking project. The IIF will facilitate the involvement of private sector participants, extending an invitation to regulated financial institutions representing each of the seven aforementioned currencies to partake in this transformative endeavour.

Source: fintech.globa

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TD Bank inks multi-year strategic partnership with Google Cloud

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TD Bank has inked a multi-year deal with Google Cloud as it looks to streamline the development and deployment of new products and services.

The deal will see the Canadian banking group integrate the vendor’s cloud services into a wider portion of its technology solutions portfolio, a move which TD expects will enable it “to respond quickly to changing customer expectations by rolling out new features, updates, or entirely new financial products at an accelerated pace”.

This marks an expansion of the already established relationship between TD Bank and Google Cloud after the group previously adopted the vendor’s Google Kubernetes Engine (GKE) for TD Securities Automated Trading (TDSAT), the Chicago-based subsidiary of its investment banking unit, TD Securities.

TDSAT uses GKE for process automation and quantitative modelling across fixed income markets, resulting in the development of a “data-driven research platform” capable of processing large research workloads in trading.

Dan Bosman, SVP and CIO of TD Securities, claims the infrastructure has so far supported TDSAT with “compute-intensive quantitative analysis” while expanding the subsidiary’s “trading volumes and portfolio size”.

TD’s new partnership with Google Cloud will see the group attempt to replicate the same level of success across its entire portfolio.

Source: fintechfutures.com

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MAS launches transformative platform to combat money laundering

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The MAS has unveiled Cosmic, an acronym for Collaborative Sharing of Money Laundering/Terrorism Financing Information and Cases, a new money laundering platform.

According to Business Times, launched on April 1, Cosmic stands out as the first centralised digital platform dedicated to combating money laundering, terrorism financing, and proliferation financing on a worldwide scale. This move follows the enactment of the Financial Services and Markets (Amendment) Act 2023, which, along with its subsidiary legislation, commenced on the same day to provide a solid legal foundation and safeguards for information sharing among financial institutions (FIs).

Cosmic enables participating FIs to exchange customer information when certain “red flags” indicate potential suspicious activities. The platform’s introduction is a testament to MAS’s commitment to ensuring the integrity of the financial sector, mandating participants to establish stringent policies and operational safeguards to maintain the confidentiality of the shared information. This strategic approach allows for the efficient exchange of intelligence on potential criminal activities while protecting legitimate customers.

Significantly, Cosmic was co-developed by MAS and six leading commercial banks in Singapore—OCBC, UOB, DBS, Citibank, HSBC, and Standard Chartered—which will serve as participant FIs during its initial phase. The initiative emphasizes voluntary information sharing focused on addressing key financial crime risks within the commercial banking sector, such as the misuse of legal persons, trade finance, and proliferation financing.

Loo Siew Yee, assistant managing director for policy, payments, and financial crime at MAS, highlighted that Cosmic enhances the existing collaboration between the industry and law enforcement authorities, fortifying Singapore’s reputation as a well-regulated and trusted financial hub. Similarly, Pua Xiao Wei of Citi Singapore and Loretta Yuen of OCBC have expressed their institutions’ support for Cosmic, noting its potential to ramp up anti-money laundering efforts and its significance as a development in the banking sector’s ability to combat financial crimes efficiently. DBS’ Lam Chee Kin also praised Cosmic as a “game changer,” emphasizing the careful balance between combating financial crime and ensuring legitimate customers’ access to financial services.

Source: fintech.global

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